Correlation Between Caseys General and Li Ning

Can any of the company-specific risk be diversified away by investing in both Caseys General and Li Ning at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Caseys General and Li Ning into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caseys General Stores and Li Ning Company, you can compare the effects of market volatilities on Caseys General and Li Ning and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Caseys General with a short position of Li Ning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and Li Ning.

Diversification Opportunities for Caseys General and Li Ning

0.2

Correlation Coefficient

Caseys General  Li Ning

Modest diversification

The 3 months correlation between Caseys and LNLB is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and Li Ning Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning Company and Caseys General is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Caseys General Stores are associated (or correlated) with Li Ning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Ning Company has no effect on the direction of Caseys General i.e., Caseys General and Li Ning go up and down completely randomly.

Pair Corralation between Caseys General and Li Ning

Assuming the 90 days trading horizon Caseys General Stores is expected to generate 0.41 times more return on investment than Li Ning. However, Caseys General Stores is 2.47 times less risky than Li Ning. It trades about 0.08 of its potential returns per unit of risk. Li Ning Company is currently generating about -0.02 per unit of risk. If you would invest  22,501  in Caseys General Stores on September 5, 2024 and sell it today you would earn a total of  17,099  from holding Caseys General Stores or generate 75.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Caseys General Stores  vs.  Li Ning Company

Caseys General Stores

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caseys General unveiled solid returns over the last few months and may actually be approaching a breakup point.

Li Ning Company

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Li Ning reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caseys General and Li Ning

The main advantage of trading using opposite Caseys General and Li Ning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caseys General position performs unexpectedly, Li Ning can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Li Ning will offset losses from the drop in Li Ning's long position.

The idea behind Caseys General Stores and Li Ning Company pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.